Economic growth and employment patterns, dominant sector, and firm profiles in Ethiopia: Opportunities, challenges and Prospects

r4d Working Paper 2015/2 by Tadele Ferede and Shiferaw Kebede

ABSTRACT: In this paper, the evolution of macroeconomic policies and their outcome in terms of output growth both aggregate and sectoral, productivity changes, and employment structure has been investigated using data from Ethiopia. In addition, the study assessed the nexus between economic growth, productivity, and employment patterns. The various reforms undertaken in Ethiopia since the 1990s seem to have positively impacted both overall economic performance and of labour market. Although the sectoral composition of the Ethiopian economy has changed from agriculture to services, changes in the composition of employment have lagged behind. Both employment expansion and productivity growth have been the sources of output growth in recent years. Economy-wide labour productivity growth has been accompanied by employment growth, but the former has been strong, outpaced the growth of employment. The within-sector productivity growth accounts for much of the aggregate labour productivity growth in Ethiopia. Structural change has also played an important role for enhancing labour productivity growth in the country. Labour productivity levels have remained low in agriculture and manufacturing sectors. Note that wholesale and retail and construction sectors have been characterized by low productivity and earnings, with a high degree of informality.